Ugie factory is set to lift profit at PG Bison

Tag : Melamine Faced Chipboard

Consumer Industries Correspondent


WOOD producer PG Bison’s new R1,5bn particle board factorynear Ugie, Eastern Cape, is expected to add R100m to its operatingprofit when fully operational.
The new factory will also save the company tax, and eliminate theneed to import chipboard.


PG Bison, owned by Steinhoff International (SHF), expects to almostdouble production at the plant, which can produce 1000m³ a dayof particle board.

Steinhoff CEO Markus Jooste said the facility also opened upopportunities to move into exporting chipboard, a market that waspreviously not accessible as the wood manufacturer was forced toimport to meet demand.
The Ugie plant will help Steinhoff meet its aim of 15% tax in themedium term as it benefits from the favourable tax dispensation andallowances available to the project.
In addition to the normal wear and tear allowances, PG Bisonqualified for the maximum benefit allowed under the trade andindustry department’s strategic investment programme.
This amounted to a maximum allowable tax deduction of R174m overthe next few years, the company said.

Nedcor Securities analyst Syd Vianello said that the new plantwould give PG Bison a tax break not available at its plant inStellenbosch.
The group will close its Stellenbosch plant, which produces225m³ a day, in a few weeks. The Ugie plant will replace thiscapacity as well as the roughly 380m³ a day imports of theboard.


Vianello said the forest was key to the viability of the ventureas timber prices continued to move upwards. Stellenbosch, he said,had to purchase timber to mill, which would be yet another costsaving.

PG Bison owns 82000ha , 40% of which is planted with pine trees.About 6500 trees, or 1800 tons, a day are required to feed theplant.

PG Bison CEO Chris van Niekerk said the plant was on budget andahead of schedule. He said the volume and quality of the particleboard produced enabled PG Bison to compete with internationalcompanies.
The plant could also process 35000m² of melamine-faced boarda day. In future, said Van Niekerk, an entire timber cluster wouldbe developed as the plant expanded into other timber beneficiation.


Once at full capacity, the new plant would add R100m in earningsbefore interest, taxes, depreciation and amortisation to thecompany’s income statement.
The regional project, the North Eastern Cape Forestry Cluster, wasexpected to aid PG Bison in continuing to grow earnings at 25% ayear.

The plant, which was built by PG Bison, and the plantationpurchased from Mondi, require staff of 1200 people, the bulk ofwhich are sourced from surrounding communities in Eastern Cape. Itsannual salary bill is about R90m, most of which is expected to bespent locally. A total of 2700 jobs should be created when thecluster is fully operational.

The plant is Steinhoff’s biggest greenfields development, andabout 80% of the R1,5bn was spent locally.